In the face of a massive infrastructure funding gap, African leading financial institutions are increasingly turning to China’s booming panda bond market. The Africa Finance Corporation (AFC) and the African Export-Import Bank (Afreximbank) are at the forefront of this strategic pivot, seeking to leverage the yuan-denominated debt instruments to diversify funding sources and accelerate development across the continent.

Last week, the AFC secured an AAA domestic credit rating with a stable outlook from China Chengxin International Credit Rating Co. Ltd (CCXI). This milestone not only highlights the corporation’s financial resilience but also marks a significant step in its integration into China’s domestic debt capital markets. The rating paves the way for AFC to issue panda bonds — renminbi-denominated debt sold by foreign entities in China’s onshore market — furthering its mission to bridge Africa’s infrastructure deficit.

“This recognition at the highest level validates our financial resilience, robust governance, and global reach,” said Samaila Zubairu, President and CEO of AFC. “The AAA rating allows us to forge stronger ties with Asian markets, enabling investments that drive economic development, job creation, and prosperity in Africa.”

The move is part of a broader strategy to tap into China’s deep pool of liquidity. AFC’s financial profile, which includes a 15.3% rise in profits to $329.7 million in 2023 and assets surpassing $12 billion, positions it well to attract Chinese investors. Its Basel II capital adequacy ratio of 34.5% and liquidity coverage ratios exceeding 140% further demonstrate its fiscal strength.

Afreximbank, another major African multilateral financial institution, also announced it has received an AAA rating from CCXI this week. The bank’s Senior Executive Vice President, Denys Denya, noted that this endorsement strengthens its ability to raise competitively priced capital in China’s financial markets. “The panda bond market offers new opportunities to diversify our funding partnerships and further our developmental mandate across Africa,” Denya stated.

Afreximbank has already made significant strides in accessing alternative funding sources. Its 2024 Samurai bond issuance in Japan set a precedent, and the bank now plans to explore panda bonds in 2025 to support its initiatives under the African Continental Free Trade Area (AfCFTA).

The Rise of Panda Bonds

The panda bond market has witnessed remarkable growth, with issuances hitting a record 194.8 billion yuan ($26.7 billion) in 2024 — a 26% increase year-on-year. Notably, purely foreign issuers accounted for 40% of the total, tripling their participation compared to 2023. This surge reflects the increasing internationalization of the renminbi and China’s efforts to position its currency as a viable alternative for global financing.

Samuel Fischer, Head of China Onshore Debt Capital Markets at Deutsche Bank, attributed the growth to favorable yield advantages and regulatory reforms that allow funds raised through panda bonds to be remitted abroad. “The renminbi financing environment remains competitive and appealing,” Fischer remarked, highlighting China’s accommodative monetary policies and the growing use of its currency in cross-border trade.

Germany, Singapore, and France have led the charge among non-Chinese issuers, with African institutions now joining the fray. For Africa, panda bonds offer not only competitive pricing but also a chance to diversify their investor base and mitigate reliance on traditional Western markets.

AFC’s history of collaboration with Chinese financial institutions illustrates the growing synergies between Africa and Asia. In 2024, AFC secured a $1.16 billion syndicated loan from the Bank of China and the Industrial and Commercial Bank of China (ICBC). Additionally, a five-year facility from the Export-Import Bank of China supported trade finance and private sector development.

These partnerships align with China’s Belt and Road Initiative (BRI), which has deepened economic ties between the two regions. AFC’s projects, such as the Dangote Refinery in Nigeria and ARISE Integrated Industrial Platforms, underscore its role in facilitating industrialization and energy transitions.

While the pivot to China’s debt markets offers numerous benefits, it also raises critical questions about debt sustainability and long-term strategic alignment. As African institutions increasingly embrace China’s panda bond markets, they must navigate the complexities of currency risk, regulatory compliance, and geopolitical considerations.

AFC and Afreximbank’s move into China’s capital markets is not just a financial maneuver — it signals a broader shift in Africa’s approach to infrastructure financing. By diversifying funding sources and fostering deeper ties with Asia, African funders are positioning themselves to play a more prominent role in global capital markets.